Equity markets tried to regain their footing on Tuesday, but the outlook continues to sour, so do not read too much into the move. The FOMC chief Jerome Powell made remarks on Tuesday that point to more rate hikes than the market currently has priced in. If the committee follows through on this hint, interest rates could peak above 5.0% and remain above 5.0% until 2024, provided there is no recession in the interim.

The next big hurdle for the market will come on Friday with the twin releases of the CPI index and bank earnings. The index is expected to show cooling at the monthly and YOY levels but to remain hot relative to the FOMC's target of 2.0%. In this light, the market might expect the FOMC to possibly reduce the pace of interest rate hikes to a 25 basis point pace but to extend the timeframe for hiking into the second half of the year.